“Already, the Affordable Care Act is helping to slow the growth of (Medicare’s) health care costs.”
President Barack Obama during the State of the Union speech Tuesday
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In his State of the Union address, President Barack Obama warned those who love Medicare that changes to the program are needed because rising health care costs for seniors are “the biggest driver of our long-term debt.”
Obama said he was open to changes such as asking wealthier seniors to pay more, and paying hospitals and doctors to be more efficient. But he also took credit for his signature health care law.
“Already, the Affordable Care Act is helping to slow the growth of health care costs,” he said.
Many of the major provisions of the 2010 health care law have yet to take effect. So how can the law already be slowing the growth of health care costs? We decided to check it out.
Slowing spending
As Obama spoke, the White House posted slides on its website to back up his key points.
For his health care comment, a chart showed Medicare spending projections from the nonpartisan Congressional Budget Office, both before the passage of the Affordable Care Act and afterward. The chart shows the future growth noticeably slowing after the law’s passage.
The numbers were part of the CBO’s regular update on the country’s economic outlook and the federal budget. We reviewed the latest numbers, which were released Feb. 5, as well as news coverage of the findings.
The CBO report says that health care spending has grown much more slowly in recent years, both for federal programs and overall. In response to that slowing growth, the CBO reduced its projections for future Medicare spending. Since March 2010, the CBO has lowered its projections for Medicare spending in 2020 by roughly 15 percent, the report said.
But the CBO did not specifically credit the Affordable Care Act for the lower projections. Some aspects of the law, the report said, will slightly increase federal outlays in Medicare and Medicaid.
Health care law phasing in
As we noted above, the health care law isn’t fully in effect yet. For example, a requirement that Americans get health insurance or pay a penalty won’t take effect until 2014.
For Medicare, the law includes both spending and cost savings.
Beneficiaries can now receive expanded prescription drug coverage and preventive care without co-pays under the law; but those benefits increase costs.
On the other hand, the law has also limited payments to insurance companies that operate the Medicare Advantage program, which saves money. Changes in payments to hospitals have also started, rewarding hospitals that have become more efficient and penalizing those that have not.
Trends in health care spending
Getting back to health care costs, it’s clear that the growth in spending is going down. But what’s driving it?
Some blame the down economy. When people feel poor, they don’t spend as much, even on health care. Under this scenario, health care spending will rebound when the economy improves.
Others say the overall health care system is moving away from payments for each procedure and test, and moving toward payments for better overall outcomes. The health care law includes provisions to encourage that switch. If this is the case, reduced spending growth should become permanent.
The Obama administration says more than a weak economy is driving reductions in spending. “The economic recession may have contributed to the 2010-12 decrease in growth in per beneficiary spending as consumers use less care due to its cost,” the HHS memo says. “However, as almost all Medicare beneficiaries have supplemental coverage and thus face relatively low out-of-pocket costs, it seems unlikely that consumer behavior alone is responsible for the slow growth in Medicare spending.”
Deborah Chollet, a senior fellow at Mathematica Policy Research, said the health care system is responding to the new law already. Insurance companies and other payers know about the new payment methods the law supports, and they are planning accordingly, she said.
“It’s really not at all a situation of the lights turning on Jan. 1, 2014,” she said. “The lights have been on for the past six months.”
Still, determining causes behind the spending slowdown is no easy task, said Bradley Herring, a professor at the Bloomberg School of Public Health at Johns Hopkins University.
“I think most people think the slowdown we’ve seen in health care spending over the last three years has been due to the recession,” he said. “But no one’s 100 percent sure why that happened.”
Our ruling
Obama said, “Already, the Affordable Care Act is helping to slow the growth of health care costs.”
Health care costs are slowing, but there’s no conclusive evidence that the law is helping.
Among health care experts, we found debate over how much the Affordable Care Act is contributing to an overall slowdown in health spending. Some say the recession is making people spend less on health care. Others say the health care system is changing to become more efficient. Many say more study is needed.
Obama’s taking credit for more than he can prove. Overall, we rate his statement Half True.
